Buying and Selling Real Estate

Purchasing real estate is one of the largest financial transactions most people will make. Understanding the legal process protects your interests and helps avoid costly mistakes.

The Purchase Agreement

The process begins with a purchase agreement (or contract of sale), which outlines:

The purchase price and payment terms

Contingencies — conditions that must be met (financing, inspection, appraisal)

Closing date — when ownership will transfer

Earnest money deposit — a good-faith payment showing the buyer's commitment

Property disclosures and representations

Due Diligence

Before closing, the buyer should conduct thorough due diligence:

Home inspection — a professional examines the property's physical condition

Title search — confirms the seller has clear title and reveals any liens, easements, or encumbrances

Survey — confirms property boundaries

Appraisal — determines the property's fair market value (required by most lenders)

Environmental assessment — checks for contamination or hazards (common in commercial transactions)

Title Insurance

Title insurance protects the buyer (and lender) against defects in title that were not discovered during the title search. There are two types:

Owner's policy — protects the buyer's equity

Lender's policy — protects the mortgage lender's interest

The Closing Process

At closing (also called settlement):

1. The buyer signs the mortgage documents (if financing)

2. The buyer pays closing costs (loan origination fees, title insurance, recording fees, taxes)

3. The seller delivers the deed transferring ownership

4. The deed is recorded with the county recorder's office

5. Keys are transferred

Types of Deeds

General warranty deed — the strongest form; the seller guarantees clear title against all defects

Special warranty deed — the seller only warrants against defects arising during their ownership

Quitclaim deed — transfers whatever interest the seller has with no warranties; commonly used between family members or to clear title defects

Seller Disclosure Requirements

Most states require sellers to disclose known material defects — structural problems, water damage, lead paint, pest infestations, or environmental hazards. Failure to disclose can lead to liability for fraud or misrepresentation.

Buying and Selling Real Estate